Financial planning is important if one wants to live a worry-free life. Most aspects of financial planning focus on the uncertainties of life as it is ongoing, but one must also give a thought to the financial security of their loved ones when one is no more. A well-structured life insurance policy is the best way to ensure that your loved ones do not suffer financially in your absence. There are many kinds of life insurance policies that one can choose from. However, term life insurance remains to be the most popular. Why so? A look at the various term insurance benefits can help you understand why.
What is term insurance?
A term insurance policy differs from other life insurance products in regard to the duration that it offers. Unlike whole life insurance policies, a term plan provides coverage for a limited period only. So, if you are a 30-year-old individual buying a plan that covers you for the next 30 years, the plan will provide you coverage until you are 60 years old. The term plan provides the sum assured as decided if anything unfortunate occurs with you within these 30 years.
Benefits of term insurance
Provides affordability of the highest degree
The best part about term insurance is that it is completely affordable. Since it offers coverage for a limited period only, most insurers quote lower premiums as compared to other types of life insurance policies. It may also be cheaper because it is a pure protection plan; it is not concerned with obtaining market-related returns or accruing hefty maturity benefits. A term plan’s sole objective is to provide you with a life cover.
The best way to get an estimate of the premium before you buy a term plan is to use the term insurance plan calculator.
Offers increment in coverage with riders
If you are looking to increase your term insurance coverage, you can do so by opting for various add-ons. The most popular add-on is the critical illness benefit rider, which provides a lump sum payout if you get diagnosed with a covered critical illness.
The financial consequences of a life-altering accident can be minimised by opting for the accidental permanent total/partial disability rider. This add-on provides financial compensation when you undergo the said conditions due to an accident. Accidental deaths can be covered by opting for the accidental death add-on.
If you want to know the hike in premium that adding a rider can bring, then you can get an estimate of the same via a term insurance plan calculator.
Provides financial security in the form of payouts
A regular term plan usually has three types of payouts which can be looked at as the savings components of the plan. Firstly, you get the surrender value if you terminate the policy during its course. Secondly, you get the maturity benefit if you outlive the maturity of your term plan. This is only applicable if you opt for the ‘return to premium’ feature in which you receive the total premiums paid during maturity.
And lastly, the death benefit payout ensures the financial well-being of your family by providing them with adequate finances to live dignifiedly.
Aids in tax-saving with tax exemptions and deductions
As per Section 80D of the Income Tax Act, the premiums paid towards your term plan are eligible for tax deductions of up to Rs. 1.5 lakhs. If you have opted for a critical illness benefit rider, then the premiums paid towards the rider are eligible for tax deductions under Section 80 (D). Additionally, the death benefit pay-out, the surrender benefit payout, and the maturity benefit are exempted from taxation under Section 10 (10D).
Grows with you
A term plan adapts itself to the different stages in your life. As you get married and have children, the sum assured increases to suit your growing coverage needs.
Brings peace of mind
Perhaps the most important of all term insurance benefits is the peace of mind it brings. When you know that your near and dear ones will be protected against financial difficulties and will be armed with enough finances to follow their goals, you can breathe a little easier.
While the benefits of a term plan are considerable, they may differ depending on the coverage and features provided by the insurer.